Dive Brief:
- Small brands that already have distribution at Whole Foods stores could see their footprint expand dramatically under Amazon’s management and the grocer’s increasing focus on procurement at the national level, according to USA Today.
- However, sources interviewed by USA Today agreed it will be harder for new brands to break into the chain, and may necessitate more of an upfront investment from these suppliers. “What may happen is the stepping stone is just going to change,” Ron Tanner, vice president of philanthropy, government and industry relations at the Specialty Food Association, told the newspaper. "It’s going to be specialty foods store, it could be a local grocer, it could be other things and then they move into larger stores as they go forward.”
- “If you’re a little brand and you’re not really making it happen, it’s going to hurt,” Jennifer Constantine, CEO of JC’s Pie Pops, which sells to Whole Foods stores, told USA Today. “But if you sell, then you’ve got a much bigger platform now.”
Dive Insight:
Suppliers and industry observers worry that Whole Foods’ increasing focus on national-level buying will hollow out the retailer’s identity as a place for unique local brands. This is certainly a legitimate concern, though sources interviewed by USA Today seem to believe the matter is overstated. According to them, Amazon-owned Whole Foods can still source compelling small brands — they may just need to be a step or two further along in development.
There seems be some truth to this assertion. Products don’t have to be exclusive to Whole Foods in order to be considered new and exciting by customers. They just need to be unique among the chain’s direct competitors, and attractively priced, too.
Whole Foods could, for instance, scale up a product that’s performing well at a small independent chain, or at a single store. This would still make the item unique for many shoppers, and would save the chain a lot of the early legwork on scouting and developing brands.
It’s also worth keeping in mind that, while niche products do attract high-value customers — “Whole Foodies,” in this case — Amazon and Whole Foods seem to be more interested in the mainstream shoppers that have drifted towards natural and organic products in recent years. They want to bring the Kroger and Safeway shoppers into their stores, not just the hipsters.
This all comes as tough news for startup suppliers, who will probably find it even more difficult to break into Whole Foods cold. These manufacturers might instead focus on independent stores, which already serve as a stepping stone to larger retailers.
Independent retailers, meanwhile, have an opportunity to attract and showcase new brands. But they should consider how they might play defense against Whole Foods should the retailer cherry pick their top selections.
If Whole Foods/Amazon can stock brands that strike an effective balance between mainstream appeal and uniqueness, it could be very well be the major disruptor everyone fears.
